By Jeremy C. Owens, MarketWatch
MarketWatch photo illustration/iStockphoto
Oracle Corp. shares moved higher in after-hours trading Thursday after the company reported sales growth of slightly less than 2%, its highest increase in nearly two years.
Oracle /zigman2/quotes/202180826/composite ORCL +0.39% reported fiscal third-quarter profit of $2.6 billion, or 79 cents a share, on sales of $9.8 billion, up from $9.62 billion a year ago. Oracle has struggled to increase revenue, posting year-over-year gains of less than 0.5% for six consecutive quarters before Thursday’s increase of 1.9%.
After adjusting for stock-based compensation and other factors, Oracle reported earnings of 97 cents a share, up from 87 cents a share a year ago. Analysts on average expected adjusted earnings of 96 cents a share on sales of $9.75 billion, according to FactSet.
Oracle also announced that its board had authorized $15 billion in additional stock buybacks. Oracle is a prolific purchaser of its shares, having spent $13.9 billion though the first nine months of the current fiscal year on buying back stock, which is actually down from the previous year, when Oracle spent $29.9 billion in the first nine months of the year on its own shares.
Oracle stock has not been immune to the recent market downturn that has ended the decade-plus-long bull market in recent days, though Oracle wasn’t performing too strongly before the coronavirus-influenced retreat either. Shares have declined 24.6% in the past year, as the S&P 500 /zigman2/quotes/210599714/realtime SPX +1.36% has dropped 1.8%. On Thursday, Oracle stock declined 11% in the regular session to $39.80, then gained 4.4% in after-hours trading immediately following the release of the results.
Oracle has reportedly been laying off employees in Europe recently , which could portend continued difficulty to achieve promised revenue growth as it attempts to catch up with younger rivals that are native to the cloud.
“The scope of 3Q headcount reductions in Europe and dramatically slower pace of hiring since September suggest that Oracle’s move to the cloud is presenting structural challenges,” Wedbush analysts wrote in a preview of the earnings this week, in which they maintained a neutral rating but dropped their price target to $49 from $56 on concerns about Oracle’s guidance.
Oracle Chief Executive Safra Catz said that her guidance for the fiscal fourth quarter was purposefully wide due to concerns about the spread of COVID-19. She projected revenue in a range of a decline of 2% to a gain of 2%, which works out to $10.92 billion to $11.36 billion, and adjusted earnings of $1.20 to $1.28 a share. Analysts on average projected fiscal fourth-quarter adjusted earnings of $1.23 on sales of $11.31 billion, according to FactSet.